The federal research and development (R&D) tax credit is one of the most commonly missed tax incentives for small and mid-size businesses. It is a permanent credit under IRC §41, and you do not need a lab or white coats to qualify — software teams, manufacturers, engineering firms, and even food producers claim it every year.
Who typically qualifies
You may qualify if your business spends money trying to develop or improve a product, process, formula, or software, and the work involves technical uncertainty and a process of experimentation. Common examples include developing new software features, improving manufacturing processes, prototyping, and testing new materials or formulations.
What expenses count
Four categories of spending generally count toward the credit: employee wages tied to qualified research work, supplies consumed in research, contract research (usually only partially includable), and certain cloud computing or computer rental costs used in research.
What changed for tax year 2026
Under the current OBBBA-era rules, the credit remains permanent, but the IRS Form 6765 Section G reporting requirements apply from tax year 2026. That means more detailed documentation of your qualified research activities — another reason to get your numbers organized early rather than at filing time.
How much is it worth?
As a rough planning range, the federal credit typically lands between 6% (first-time claimants) and 14% (established claimants using the ASC method) of qualifying spend. A company with $500,000 in qualified research expenses could be looking at a credit in the $30,000–$70,000 range. Startups may also be able to elect to apply the credit against payroll taxes.
Estimate yours in 60 seconds
Our free R&D tax credit calculator gives you a preliminary range with no signup — the numbers you type never leave your browser. If the estimate is large enough to matter, request a professional review and we will match you with a vetted specialist firm.
This article is for preliminary education only and is not tax, legal, or accounting advice.